What is Errors and Omissions Insurance?

Errors and Omissions (E&O) insurance protects you if a client claims that your work—or lack of it—caused them financial loss. It’s a type of professional liability insurance, known as professional indemnity insurance in the UK.

It safeguards your reputation and your finances, ensuring your business survives unexpected challenges.

So, what is errors and omissions insurance?

In this guide, we’ll explain everything you need to know about E&O insurance. From what it covers to who needs it, how it’s different from professional indemnity and how much it costs. We’ll help you understand what E&O is and why it matters, so you can make the right decisions for your business.

What is errors and omissions insurance in the UK?

Errors and omissions (E&O) insurance, also known as professional indemnity insurance in the UK, provides financial protection for businesses facing claims of professional negligence, errors, omissions or failure to meet expectations.

If a client accuses you of making a mistake, not delivering on promises or providing substandard service, E&O insurance can cover legal fees, settlements and compensation. Even if claims are unjustified, the cost of defending yourself can quickly spiral.

Imagine you’re a financial consultant advising a client on their investment strategy, and a calculation error results in significant losses. Or perhaps you’re a web developer, and an error in your code crashes a client’s website during an important product launch.

It’s situations like this where errors and omissions insurance comes in. It helps cover legal expenses and settlements, giving you peace of mind if something goes wrong.

Are you looking for insurance cover to support your business? Get in touch with us! A member of the Howden team would love to help you find the perfect policy!

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What’s the difference between E&O and professional indemnity insurance?

Errors and omissions insurance is commonly found in US and South American markets. In the UK, this type of cover generally falls under professional indemnity (PI) insurance.

In the UK, E&O is often seen as a specific type of professional indemnity insurance. Both cover professional negligence claims, mistakes or failure to meet expectations. But US E&O policies tend to be more closely tailored to industries like tech, finance and consulting.

Errors and omissions vs. professional indemnity insurance

• Scope and specificity: Professional indemnity often covers a broader range of industries and situations. E&O insurance is more tailored to industries such as tech, finance and consulting.
• Terminology: “E&O” is mainly used in the US, while “professional indemnity” is the standard in the UK.
• Regulation: In UK regulated sectors (like law or finance), professional indemnity insurance is often legally required.

Despite the differences in terminology, the overall goal remains the same: both types of insurance protect businesses from the financial fallout of negligence or errors.

Read more: What is Professional Indemnity Insurance?

What does errors and omissions insurance include?

Whether we’re calling it errors and omissions or professional indemnity, this type of insurance protects your business from the financial fallout of claims against your services. If something goes wrong and a customer blames your advice, E&O is there.

Specific policies differ from insurer to insurer. So it’s worthwhile talking to different companies to understand what’s included (and what’s not) before signing-up.

But in general, here’s a breakdown of common E&O cover.

What does errors and omissions insurance cover?

A “standard” E&O policy helps cover the costs of defending yourself, plus any settlements or court-ordered damages. It covers cases of:

• Negligence: Allegations of poor work, negligence claims, misrepresentation or failure to meet industry standards.
• Errors or omissions: Mistakes, oversights or forgetfulness that cause financial loss to your clients.
• Defamation: If you make false statements that harm someone’s reputation.
• Breach of trust: If you disclose sensitive information or break a confidentiality agreement.
• Breach of contract: Claims that you’ve missed deadlines or failed to deliver agreed-upon work.

E&O insurance is more geared towards professional services firms (like planning consultants, lawyers, surveyors and engineers), rather than manufacturing, property or hands-on trades. You’ll often find specific policies (say, landlord’s insurance or tools insurance) for these specialised industries.

What does errors and omissions insurance not cover?

While E&O insurance offers great protection, it’s not a catch-all. Here are some things most policies won’t cover:

• Physical injuries or property damage: If someone suffers bodily injury or their property is damaged, this usually falls under public liability insurance.
• Intentional acts: E&O won’t cover fraudulent behaviour or illegal acts, or damage caused deliberately or recklessly. Essentially, anything where criminal prosecution is involved.
• Employee-related issues: Claims from employees (about things like harassment, wrongful dismissal or discrimination) are typically covered by employers liability insurance.
• Historic claims: E&O insurance only covers your business from when the policy starts. Any incidents that happened before the policy started won’t be covered, unless it includes something called a “retroactive date”.

What’s the limit on E&O policies?

For errors and omissions or professional indemnity policies, the “limit” is the maximum amount your insurer will pay if something goes wrong. This includes the legal fees to defend your case as well as damage settlements and related expenses.

Typically, policy limits range from £100,000 to £5 million. For certain businesses, you might go as high as £10 million. The right limit depends on the size of your business and the risks you face. If you’re in a high-risk industry (like law or tech) or working with large contracts, it’s worth considering higher limits to ensure you’re fully covered.

Who needs errors and omissions insurance?

Errors and omissions (or professional indemnity) insurance is more than a safety net against financial loss. It can also enhance your professional reputation. When clients know you’re insured, it sends a message that you’re responsible, reliable and committed to delivering top-quality work.

In short, if you provide professional services or advice, it’s worth considering. But some industries rely on it more than others:

• Engineers, Architects and Surveyors: E&O insurance could help if a design flaw causes structural issues, like a building foundation cracking due to miscalculated load-bearing capacity, leading to costly repairs and legal action.
• Law firms: If a solicitor gives incorrect legal advice that causes a client to lose a case or miss a crucial deadline, E&O insurance could cover court costs and potential damages.
• Consultants (Business, IT, HR): If a business consultant recommends a strategy that ultimately harms the client’s operations—like a failed market expansion resulting in significant financial losses—E&O insurance could step in.
• Financial Advisors and Accountants: If a financial advisor miscalculates income or gives poor investment advice, E&O insurance could cover any resulting claims.
• Creative fields: In fields like graphic design or digital marketing, if a campaign or design misrepresents a client’s brand or there are major mistakes in copy, E&O insurance could cover any lawsuits and potential settlements.
• Technology: If a software developer’s coding error crashes a client’s website during a major launch (causing reputational damage and lost revenue), E&O could help.
• Estate Agents: If an estate agent fails to disclose important issues with a property or misrepresents the terms of a sale, E&O insurance could protect against the legal costs of resolving claims.

For those in regulated fields like law, accountancy, surveying or architecture, E&O or PI insurance might be required by law. Larger clients may also insist on specific coverage levels in contracts.

Professional liability coverage isn’t just for big businesses either. Freelancers, small business owners and sole traders all benefit. We all make mistakes. But an E&O policy ensures you’re protected if a claim arises.

Read more: What business insurance do I need?

How much is errors and omissions insurance?

So, how much does E&O insurance cost?

The cost of errors and omissions (or professional indemnity) insurance varies depending on your profession, the coverage you need and the size of your business. For freelancers and small businesses in the UK, premiums typically range between £100 and £500 per year. However, if you run a larger organisation or work in a high-risk industry like finance, tech or construction, costs can climb to £1,000 or more annually.

What affects the cost?

There are a few factors influencing how much insurance companies charge for E&O or PI insurance:

• Your industry: Some professions come with more risks. For example, a financial advisor or IT consultant might pay more due to the potential for expensive claims.
• Business size: Larger businesses with higher turnover often face higher premiums since they tend to work with more clients, increasing the risk of potential claims.
• Claims history: If you’ve made insurance claims in the past, insurers may see you as a higher risk, which can increase your costs.
• Policy features: Coverage limits and optional extras play a big role. Insurance policies with higher limits (such as £1 million or £5 million), or add-ons like public and employers’ liability, will cost more.

How to choose the right errors and omissions policy for your business

Choosing the right errors and omissions or professional indemnity insurance protects your business from the unexpected. The right professional liability policy financially safeguards you against claims of mistakes, negligent acts or not meeting industry standards. But how can you find a policy that fits your unique needs?

Here are the main things to keep in mind.

1. Understand your risks

Think about the challenges your business might face and the worst-case scenarios. The risks will depend on your industry. For example, a consultant might face claims over poor professional advice, while a designer could deal with disputes over work quality.

Many policies are tailored to specific professions, so make sure the one you choose matches the nature of your work and covers the situations you’re likely to encounter.

2. Work out what coverage you need

Insurance coverage is about balancing the level of protection you need with what you can afford. Policies typically come with two main limits:

• Per claim limit: the maximum amount your insurer will pay for a single issue.
• Total limit: the overall amount they’ll pay for all claims during the policy term.

For instance, a policy might cover up to £100,000 per claim and £500,000 total. Consider your business size, the kind of clients you work with and the value of your work when deciding what limits make sense for you.

3. Compare different providers

Each insurance company offers a slightly different service. So take the time to compare, looking at more than just the price and policy terms. Check reviews to see how other businesses rate their experiences. Good customer support will make a big difference if you ever need to make a claim.

4. Tailor the policy to fit your specific needs

Some policies let you add extra coverage for specific risks. For example, cyber liability insurance could be a valuable addition if your IT business handles lots of sensitive data. Customising your policy ensures it fits the unique demands of your work.

5. Read the details carefully

It’s tempting to skip over the small print. But it’s worth checking for any common exclusions (i.e. scenarios that aren’t covered) or limits that could leave you exposed. Pay particular attention to what’s not included, how much you’ll need to pay in excess, and any conditions you need to meet to stay covered.

In summary: Is errors and omissions insurance necessary?

Mistakes happen, no matter how skilled or experienced you are. Whether it’s a simple oversight, a missed deadline or miscommunication, even the best professionals can face client complaints.

This is why errors and omissions insurance (or professional indemnity in the UK) is important. For some professions, this type of insurance isn’t optional. It’s a legal requirement. Fields like law, accountancy, surveying and financial services often stipulate professional indemnity insurance to protect professionals and their clients.

Even if it’s not compulsory for your industry, it’s still highly recommended. Errors and omissions insurance shows clients you’re responsible and prepared. It covers legal fees and damages, so your finances are safeguarded in case of claims related to your business activities.

At Howden Insurance, we provide tailored and flexible insurance policies with exactly the right cover. Enjoy peace of mind knowing you’re protected, so you can focus on growing and running your business. Get in touch today to speak with an expert advisor.

Also read:

• What is Professional Indemnity Insurance?
• Business tax account
• What is a sole trader?
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